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What is a guarantor loan?

Getting a loan can become very challenging without having a good credit history or in case you have a bad credit, . You will either have difficulties to obtain a loan in the first place, or you will end up paying a pretty high rate of interests, and you could easily find yourself with some serious debt problems. However, lately in the United Kingdom, a new type of loan had been launched known as the guarantor loan. This new concept enables you to get a loan, where an other person acts as your guarantor.

In this article we will try to answer the main question usually asked about guarantor loans in a simple Q&A style.

1 – What Is a Guarantor Loan?

Guarantor loans are unsecured loans requiring a second individual to serve as being a guarantor. Guarantor loans can range over terms of about one to five years and you can lend different amounts of money ranging from £1,000 to £7,500. They provide a perfect option for people with a bad credit, who, if not using this solution, would be incapable of obtaining any loan. Guarantor loans are not pay day loans, the interest is a lot lower and you will not be billed any arrangement or up front fees.

2 – How Do I Know Whether This Type of Loan is Right For Me?

If you have bad credit history or have been refused by other loan providers, then guarantor loans might be fortunately the right option for you. A guarantor loan also enables you to lend a higher amount than you would be able to get with other types of loans which target people with a poor credit. It is even possible to ultimately restore your credit history by showing that you are a reliable borrower and are in a position to settle your payments on time.

3 – How To Apply For a Guarantor Loan?

First of all, just like all loan applications, you need to be over 18 years old and posses a UK bank account in which the repayments can be settled. You will still have to show that you are able to afford the repayments and that you can pay the loan back in a well-timed fashion.

4 – Who Can Stand as a Guarantor For Me?

Pretty much anyone can be your guarantor, provided that they are not financially related to you (i.e.spouse). A guarantor can be a friend, a family member or even a work colleague. For your guarantor to be approved they will generally need to be more than 21 years old with a good credit history and as well be a UK resident. Checks on your guarantor are typically equal to normal credit checks; they will have to provide bank details, bank reports and a proof of ID.

5 – How Much Interest Shall I Pay?

Interest will more than likely be higher compared to a loan where a good credit history is required. The APR of guarantor loans differs with regards to the loan provider, but it is generally around 50 per cent. It’s vital to keep in mind that even though this might be relatively high, it does represent the risk undergone by the loan provider. You will also realize that this is one of the most affordable APRs offered to people who have poor credit history. Lots of other ‘poor credit’ loans, such as pay day loans charge APR right up to a 1,000 per cent. Even though the APR is higher, a guarantor loan, once paid back by the due date, is an excellent way to enhance your credit history and help improve your overall credit score.

6 – How Can I Choose A Good Guarantor Loan?

A number of companies have started providing guarantor loans. The two most essential things to take into account are the interest you will need to pay and whatever other hidden charges the provider might bill you. For instance, guarantor loans provided by www.gbploans.com promote just about the most competitive prices on the market and they are also very clear about everything. There are no secret charges or extra fees through the entire period of your loan.

Conclusion

To sum up, a guarantor loan is not for everyone, but if your credit background is bad and you are in real need of some spare cash, they can be a very good solution for you.

By Jane Andrews

Financial journalist and avid money saver based in Bristol, but working out of Luton.

About me

I am a financial journalist who has a passion for money saving and blogging. I am currently working on assignment in London and I live with myself and my growing family in Luton.

I have been following the payday and short term lending market for the few years and seen many changes, from which I'm pleased they have been for the better.

With new regulation and rules imposed by the FCA I hope that this will have a positive impact on this popular and still growing market place.

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